Actual issues of increasing socio-economic stability in pandemic conditions

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June 20, 2020

Actual issues of increasing socio-economic stability in pandemic conditions

Ibragimova Naylya Muradovna

Institute for Forecasting and Macroeconomic Research,

  Project manager, PhD

Resume: During the pandemic crisis, both a policy of social sustainability and a policy of economic growth are crucial. In Uzbekistan, the basis for effective crisis management was the adoption of measures on social protection combined with mitigation of the COVID-19 economic consequences.

Keywords: incomes, social support, economic stability, anti-crisis measures, Uzbekistan

Prime task facing the country in the context of unfolding global pandemic crisis is to secure socio-economic stability and support living standards and incomes.

Coronavirus pandemic has demonstrated that both social sustainability and economic growth policies are crucial. Effective government management during epidemiological crisis was mainly based on the willingness and means-ends readiness of countries for taking joint steps: nations and governments made an important choice between economic growth, income generation and maintaining a people’s health.

On the one side, the most successful Asian countries (Taiwan, Singapore and Hong Kong) from the early stages of a sudden outbreak of the epidemic applied new methods of control and localization of the epidemia. Outstanding specific practical response methods and theoretical concepts in Taiwan relied on developed by the Center for Epidemic Control of the Spread of Infectious Diseases created after the outbreak of SARS in the region in 2003, including several research centers and government agencies. On the other side, Europe and the United States reacted very slowly without tracking infected or potentially infected people and their healthcare system was not ready to accept such large number of cases.

The spread of coronavirus has once again proven the importance of health as a major part of human capital and the need for a prepared healthcare system. Uzbekistan is taking enhanced measures for the further spread of coronavirus in the country. Particular attention is paid to the organization of quality medical services to the population, disease prevention, organization of patient care in accordance with international standards.

In order to reduce the scale of the spread of coronavirus infection and organize provision of effective medical services to patients, the Ministry of Health of the Republic of Uzbekistan has created a reserve of over 5 thousand beds in state medical institutions. Also it is allowed for non-governmental medical organizations to provide medical services to coronavirus infected patients, for a period up to September 1, 2020, on the basis of agreements concluded between the Ministry of Health of the Republic of Uzbekistan and non-governmental medical organizations, on exception base since coronavirus is classified as an infectious disease requiring emergency preventive and anti-epidemiological measures. The costs of non-governmental medical organizations related to the provision of medical services to patients infected with coronavirus are covered by the funds of the Anti-Crisis Fund under the Ministry of Finance of the Republic of Uzbekistan.

However, the task of the state as a stabilizer is also to reproduce the predictable living conditions of the population to set goals and earn income.

Based on the global impact of the coronavirus pandemic, experts expect a rapid decline in economic growth and an uncertain slow recovery. A protracted recession or recession in economic growth means a sharp increase in unemployment, an increase in the risk of impoverishment of the population, a drop in budget revenues, and, as a result, a reduction in the potential consumer and government spending on the social sphere and healthcare.

The main factor in the slowdown of economic growth and household incomes is the large-scale lockdown of enterprises or reduction in spending on services and non-food products as a result of collapse in retail trade and public catering, service sector as well as a change in consumer preferences and decreased consumer spending.

A preliminary assessment of changes in the reduction of costs for services and non-food products as a result of large-scale lockdown showed that quarantine measures can reduce the consumption of non-food goods and services by 10-15%. Since share of non-consumer goods and the service sector is about 50% in the structure of consumer spending, the overall decrease in the capacity of the consumer market (the volume of consumer spending) can amount to 7% of current consumption. However, here it will also be necessary to take into account the possibilities of reimbursing consumer demand unsatisfied during the quarantine period after the quarantine period (in part of services and non-food items), measures taken to support the population and provide free medical care and food support to vulnerable segments of the population, as well as granted loans to private sector enterprises to provide payment of wages at the expense of the state budget and various charitable funds, transition to the remote provision of services. As a result, potential consumer spending may fall by less rate (3-5% of current consumer spending).

The second factor in the income decline is the reduction in remittances from labor migrants. Thus, according to the forecasts of the World Bank [1], due to the combination of the global coronavirus pandemic and the decline in oil prices in 2020, the volume of remittances in the countries of the Central Asia will decrease by almost 28% (or $1 billion for Uzbekistan). As a result, since the estimated share of transfers of labor migrants in the total income of the population is 10% (about 38 trillion soums), a drop in transfers of 20-22% can lead to a decrease in the total income of the population by about 2 pp (20% drop in 10% of total revenue).

Reduction in income combined with negative impact of other factors (unemployment, decrease in the propensity to consume, the possible inflationary pressure) required the introduction of effective social security measures extremely important to protect the poor and vulnerable during the current crisis.

In order to preserve the incomes of people and the stable operation of enterprises, a Presidential decree was signed on March 19, 2020 on priority measures to mitigate the negative impact of the pandemic on the economy of Uzbekistan [2]. An Anticrisis fund under the Ministry of Finance of the Republic of Uzbekistan had been created in Uzbekistan in the amount of 10 trillion soums in order to ensure macroeconomic stability, nonstop operation of industries and economic sectors, effective social support to the population during the period of counteracting the spread of coronavirus infection and other global risks, and preventing a sharp decline in the country’s population incomes. Anticrisis  funds will be directed to:

• preventing the spread of coronavirus, providing medical institutions with medicines, protective and diagnostic tools, timely financing of quarantine expenses, measures to combat the spread of coronavirus infection;

• support for entrepreneurship and employment;

• expansion of social support for the population;

• ensuring the sustainable functioning of economic sectors.

An additional 3.6 trillion soums were allocated from the Anti-Crisis Fund for social services and the construction of infrastructure. In particular, solving the problems of 152 projects created over 10 thousand new jobs. So, in a month’s time, a list of additional infrastructure projects in the republic’s regions, financed by the Anti-Crisis Fund and providing for construction, reconstruction and repair, was formulated for 2020:

• infrastructure facilities of small industrial zones – in the amount of 400 billion soums;

• streets of cities and other settlements, current repair of public roads – 1 trillion soums;

• water supply and sanitation facilities – 500 billion soums;

• irrigation and land reclamation facilities – 400 billion soums;

• healthcare facilities – 500 billion soums;

• comprehensive schools and other social facilities – 800 billion soums;

• other facilities that provide increased economic activity and employment, including the expansion of mortgage lending.

An additional 200 billion soums will be allocated to the Public Works Fund from the Anti-Crisis Fund. These funds will be directed to employment, construction of additional infrastructure in the mahallas. An additional 500 billion soums was be allocated to the State Fund for Supporting Entrepreneurship to assist business entities creating jobs. 

The Ministry of Finance, the Ministry of Employment and Labor Relations have been instructed to provide interest-free loans at the expense of the Anti-Crisis Fund to pay wages to business entities that have suspended their activities due to quarantine. Parents who look after children in quarantine will be paid a 100% temporary disability benefit.

A number of measures to support the population, especially its socially vulnerable categories, have been identified. Assignment of social benefits to families with children, child care and material assistance, whose payment deadlines expire in March-June, is automatically extended by the Cabinet of Ministers to simplify the procedures for assessing the need of families to receive social benefits [3]. The expected result is an increase in the number of recipients of benefits by 123 thousand families.

In the context of the fight against coronavirus infection, food delivery was provided to needy families, single elderly people, people with disabilities and other vulnerable groups of the population.

A number of administrative and economic measures have been taken to prevent the rise in prices for food and other consumer goods, as well as the restructuring of commercial loans to business entities that have suffered from the current situation with coronavirus. Zero rates of customs duty and excise tax on the import of the most important goods – food (meat, fish, flour, sugar, dairy products, vegetable oil, eggs, onions and others) and hygiene products. Restraining the rise in food prices will ensure the availability of certain familiar foods for a very wide population, and will prevent a decline in the level and quality of life.

The outbreak of coronavirus has led to the fact that many countries have had a strict quarantine regime, companies sent their employees to work from home, schools and universities also transferred students to distance learning.

Quarantine has opened up many interesting distance learning resources to the world and has significantly promoted networking in the development of edtech distance education. Digital platforms are being developed in schools that offer many options for lessons and independent work. Global MOOC platforms are growing rapidly (MOOC – massive open online courses).

Thus countries that immediately quarantined not only limited the spread of infection, but also smoothed out the most unpleasant socio-economic consequences of the pandemic. The recession threatens massive unemployment and social instability. Therefore, Uzbekistan enjoys a number of measures, including large-scale social investments and strategies to support enterprises and the population, in order to prevent socio-economic instability.